The Lemon Fool

IGG have been a member of my HYP for quite a while and I have been happy with the performance.

Is today a day for strategic ignorance to be to the fore and a great time to buy?

Is today a day for strategic ignorance to be to the fore and a great time to buy?

Why, what happened today?

OK, I see!

This illustrates the point TJH made the other day, that shares bounced up and down the topup table all the time

IGG has gone from 33rd to Numero Uno in a morning. I'd say, it's a moment to topup as the reaction to the news is usually overdone.

Arb.

I hold in my HYP. Quite a shock to see such a drop. I think I may consider a top up. Hard to determine exactly what the FCA announcement means for IG business. Some suggestions they could move offshore.

Share price down 37%, gone from 19 to 10 on my top-up but forecast yield 4.20% doesn't stir me. Mind you I still cannot find the FCA announcement do you have a link?

Raptor.

Raptor wrote:Share price down 37%, gone from 19 to 10 on my top-up but forecast yield 4.20% doesn't stir me. Mind you I still cannot find the FCA announcement do you have a link?

Raptor.

Here you go.

https://www.fca.org.uk/news/press-relea ... e-products

forecast yield 4.20% doesn't stir me.

That's because it isn't 4.2% - the site does not update dynamically. It's 6.8% after the price fall.


Arb.

Arborbridge wrote:

forecast yield 4.20% doesn't stir me.

That's because it isn't 4.2% - the site does not update dynamically. It's 6.8% after the price fall.


Arb.

You know I missed that, thanks. Now 6.8% is more like it.

A link about why 38% drop.

The Financial Conduct Authority proposed on Tuesday new rules for firms selling CFD (contract for difference) products after 82 percent of clients lost money on such investments.

http://finance.yahoo.com/news/european- ... 35804.html

Raptor.

CommissarJones wrote:
Here you go.

https://www.fca.org.uk/news/press-relea ... e-products

Thanks for that.

Raptor.

Raptor wrote:

Arborbridge wrote:That's because it isn't 4.2% - the site does not update dynamically. It's 6.8% after the price fall.

You know I missed that, thanks. Now 6.8% is more like it.

I've long had the habit of never taking the forecast yield figure from DigitalLook, but instead taking the forecast dividend and the price and doing the division in a calculator or spreadsheet. But today I've learnt another reason for that habit! :-)

Gengulphus

Gengulphus wrote:I've long had the habit of never taking the forecast yield figure from DigitalLook, but instead taking the forecast dividend and the price and doing the division in a calculator or spreadsheet. But today I've learnt another reason for that habit!

Gengulphus

You mean you can't do this in your head? A man of your calibre? Crikey! What level of accuracy do you need

All the best, Si

I've long had the habit of never taking the forecast yield figure from DigitalLook,

True - if it's important I always check. If it's just a general check on the whole HYP, I'm no so bothered.

Important to remember that DL does not update continuously, but either overnight, or when it feels like it.

Trustnet seems even worse. Why they can't they make sure that the yield is self consistent with the dividends on another page in their site ? I've emailed them twice recently about examples where there yields on funds are not just wrong but miles out. They don't even bother to reply.

Arb.

penteluk wrote:Is today a day for strategic ignorance to be to the fore and a great time to buy?

In my view, it's not a time for strategic ignorance. I'm never quite sure how most people choose to interpret that concept, but for me it means avoiding the temptation to guess the long term future of a business. What it doesn't mean for me is choosing to ignore facts which have actually occurred which may have a material impact on the business right now. (Maybe the distinction between the two gets blurry as well).

As others have pointed out, the 38% drop in the share price today is due to the FCA announcing a tightening of regulations in the CFD market. Although IGG's announcement today remained fairly tight lipped about the impact on its business, it would be reasonable to think the impact will be material. One reason to support that view is the statement made by one of IGG's competitors, Plus 500 (PLUS), which said in its announcement today:

"The Company believes that the topics covered in the note will have a material operational and financial impact on the UK regulated subsidiary which represents approximately 20% of the Groups revenues."

So in my opinion there is too much risk at present over future earnings, at least until more information becomes available. There's obviously two important parts to HYP: (1) the yield; and (2) the safety factors which give us comfort that the dividends are sustainable and will grow. I'm not going to snatch at a sharply increased yield when the second part has big question marks around it.

We've all seen similar situations over the years: perhaps someone diving in on a profits warning after a sharp fall in price, looking only at the illusory yield. A few months later there's another profits warning, and before you know it you've sat through 18 months of continuing price falls whilst the brokers keep downgrading earnings. Then what looked like a decent forecast dividend cover evaporates and a cut is on the cards. Then the buyer feels stupid for being sucked in.

When something like this happens it is often best to let the dust settle for a period of time rather than dive in head first. It's possible you could do very well buying today if it turns out to be an overraction by the market -- but it's a coin flip.

I hold IGG and have chosen to do nothing at present.

Jack

It's possible you could do very well buying today if it turns out to be an overraction by the market -- but it's a coin flip.

You are certainly correct: but today I was ready for a coin flip, even if only with a small amount of capital

Arborbridge wrote:

It's possible you could do very well buying today if it turns out to be an overraction by the market -- but it's a coin flip.

You are certainly correct: but today I was ready for a coin flip, even if only with a small amount of capital

I do not hold IG Group particularly as I don't even know what a CFD is. It doesn't pass my keep it simple rule and only invest in firms that I understand. I feel for the holders though .

Ian

Ian,

I can appreciate your point of view, but I bought IGG essentially as a gambling sector addition along with Ladbrokes. Up until know, it has been far more successful than Ladbrokes. I know a enough about CFDs to know that it plays to people's desire to gamble and get rich quickly, and that the odds are stacked against them. I'm not sure I would really understand Ladbrokes or William Hill any better - would you?
Come to that, how many people can truly understand the risks inherent in investing in big pharma, oil or any of the others? And even with a fairly straight forward operation - for example running a pub group - I've been caught out in one case by a large black hole which appeared in the stock control and which caused the company to fall into the hands of the bank.

In this case, my gamble is that the new regulations will have less affect than the market thinks, and that people's compulsion to get rich quickly will blind them to the risks as they always do. Plain cigarette packets and hiding them in supermarkets hasn't stopped people smoking, or BATs being a profitable company. My guess is that IGG will carry on being a successful company despite having to incorporate these changes since many of its customers are already experienced enough to play cautiously. Many are normal investors who use CFDs and other products in addition to our kind of investing and will not be deterred.

However, we'll see - yes, it could all go horribly wrong (a total wipe out would cost me 2.3% of capital) but I doubt that would be due to my lack of understanding of the product. How many people thought they understood Tesco, Dixons, Rentokil or RBS? Most of us, I'm afraid, understand very little: by standing on the outside and looking in, one sees only shadows moving through the glass darkly.

Arb.

Arborbridge wrote:Ian,

I can appreciate your point of view, but I bought IGG essentially as a gambling sector addition along with Ladbrokes. Up until know, it has been far more successful than Ladbrokes. I know a enough about CFDs to know that it plays to people's desire to gamble and get rich quickly, and that the odds are stacked against them. I'm not sure I would really understand Ladbrokes or William Hill any better - would you?
Come to that, how many people can truly understand the risks inherent in investing in big pharma, oil or any of the others? And even with a fairly straight forward operation - for example running a pub group - I've been caught out in one case by a large black hole which appeared in the stock control and which caused the company to fall into the hands of the bank.

In this case, my gamble is that the new regulations will have less affect than the market thinks, and that people's compulsion to get rich quickly will blind them to the risks as they always do. Plain cigarette packets and hiding them in supermarkets hasn't stopped people smoking, or BATs being a profitable company. My guess is that IGG will carry on being a successful company despite having to incorporate these changes since many of its customers are already experienced enough to play cautiously. Many are normal investors who use CFDs and other products in addition to our kind of investing and will not be deterred.

However, we'll see - yes, it could all go horribly wrong (a total wipe out would cost me 2.3% of capital) but I doubt that would be due to my lack of understanding of the product. How many people thought they understood Tesco, Dixons, Rentokil or RBS? Most of us, I'm afraid, understand very little: by standing on the outside and looking in, one sees only shadows moving through the glass darkly.

Arb.

Morning Arb,

Thank you for your considered reply to my post. You are of course correct. I bought into DSGI RTO and TSCO myself, so I guess it is a case of buyer beware. Again, I'm sorry for HYPers situation should you be holding IGG.

Regards,

Ian.

Arborbridge wrote:In this case, my gamble is that the new regulations will have less affect than the market thinks, and that people's compulsion to get rich quickly will blind them to the risks as they always do. Plain cigarette packets and hiding them in supermarkets hasn't stopped people smoking, or BATs being a profitable company. My guess is that IGG will carry on being a successful company despite having to incorporate these changes since many of its customers are already experienced enough to play cautiously. Many are normal investors who use CFDs and other products in addition to our kind of investing and will not be deterred.

Something to remember in such situations is that it's in the company's long-term interests to upplay the drawbacks of the new regulations as much as they can while remaining credible, in order to try to persuade the regulator to lighten them - and meanwhile, investors generally tend to suspect that the company is downplaying any negative news. Also, quite a few investors will be using 'stop-losses', which will tend to amplify any market fall. In combination, I can imagine those factors leading to a considerable market over-reaction...

Also, in the case of BATS, remember that the effect of increased regulation in any particular country will be diluted considerably by the fact that it is operating in many different countries. Haven't checked to see whether anything similar applies to IG...

Gengulphus

I find myself siding with Arborbridge. Markets have a habit of over-reacting and I simply don't believe the regulations would mean IGG is suddenly worth a third less overnight! At the end of the day you pay your money and take your chance. Over the last 20 years I've made more than I've lost taking such chances so I've increased my holdings today.